Correlation Between SBM OFFSHORE and Diamondrock Hospitality
Can any of the company-specific risk be diversified away by investing in both SBM OFFSHORE and Diamondrock Hospitality at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining SBM OFFSHORE and Diamondrock Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SBM OFFSHORE and Diamondrock Hospitality Co, you can compare the effects of market volatilities on SBM OFFSHORE and Diamondrock Hospitality and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in SBM OFFSHORE with a short position of Diamondrock Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM OFFSHORE and Diamondrock Hospitality.
Diversification Opportunities for SBM OFFSHORE and Diamondrock Hospitality
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SBM and Diamondrock is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE and Diamondrock Hospitality Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamondrock Hospitality and SBM OFFSHORE is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on SBM OFFSHORE are associated (or correlated) with Diamondrock Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamondrock Hospitality has no effect on the direction of SBM OFFSHORE i.e., SBM OFFSHORE and Diamondrock Hospitality go up and down completely randomly.
Pair Corralation between SBM OFFSHORE and Diamondrock Hospitality
Assuming the 90 days trading horizon SBM OFFSHORE is expected to under-perform the Diamondrock Hospitality. In addition to that, SBM OFFSHORE is 1.03 times more volatile than Diamondrock Hospitality Co. It trades about -0.08 of its total potential returns per unit of risk. Diamondrock Hospitality Co is currently generating about 0.18 per unit of volatility. If you would invest 860.00 in Diamondrock Hospitality Co on September 13, 2024 and sell it today you would earn a total of 60.00 from holding Diamondrock Hospitality Co or generate 6.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SBM OFFSHORE vs. Diamondrock Hospitality Co
Performance |
| Timeline |
| SBM OFFSHORE |
| Diamondrock Hospitality |
SBM OFFSHORE and Diamondrock Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM OFFSHORE and Diamondrock Hospitality
The main advantage of trading using opposite SBM OFFSHORE and Diamondrock Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM OFFSHORE position performs unexpectedly, Diamondrock Hospitality can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Diamondrock Hospitality will offset losses from the drop in Diamondrock Hospitality's long position.| SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc |
| Diamondrock Hospitality vs. Brockhaus Capital Management | Diamondrock Hospitality vs. LANDSEA GREEN MANAGEMENT | Diamondrock Hospitality vs. Khiron Life Sciences | Diamondrock Hospitality vs. BLUESCOPE STEEL |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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